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Santa Rally in Sight, Nifty Set to challenge 26300

ICICIdirect Research 26 Dec 2025 DISCLAIMER

Market Outlook
Equity benchmark resumed uptrend after three weeks breather and settled the week flattish at ~ 26000, supported by favorable global cues. While broader markets outperformed with the Smallcap index gaining 2%. Sectorally, beaten down pockets like Defense, Railways, Metal, Energy staged a rebound, while PSU Banks, Pharma and Consumer durable took a breather.
The weekly price action has formed small bull candle with breakaway gap-up, indicating potential conclusion of the recent corrective phase. 
Key point to highlight is that, after three week’s decline, index has resolved higher with a decisive breakout above its downward sloping channel accompanied by higher-high-low structure, indicating a pause in the current corrective phase and resumption of fresh uptrend towards 26,300 in the coming week.
Despite elevated volatility, on multiple occasions Nifty managed to hold 50 days EMA coincided with last week’s low of 25700 that makes us retain support base at 25700 for upcoming week.
 
Our constructive bias is outlined based on following observations:   
a)     Structurally, after a sharp ~500-point rally over the past few sessions, the index appears to be entering a healthy consolidation phase on the last week of year-end, amid below average turnover of 86k crores (which is 10% below monthly average turnover of 94K Cr). We expect the current consolidation will make the market healthy, which could help the index retest 26,300 in the near term and eventually pave the way towards 26,700 over the coming month.
b)     The US Dollar index has dropped from 100 levels and is now trading below 98 levels. Decline in the dollar index has fueled the rally in Copper (Trading at All Time High on MCX) while Aluminum is resolving out of 3 years base
c)     US market staged a recovery and clocked a fresh all-time high. However, it is important to highlight that current upmove is led by the broader market, rather than the magnificent 7 companies. Consequently, Russell 2000 (small cap index) is almost trading near all-time high.
d)    Santa rally on cards: Historical data since 1995 suggest that, on 90% of the occasions Nifty has delivered positive returns in last 10 days of the year with a median of 2%
 
Key Monitorable:
India IIP data
US FOMC meeting minutes
US and India Trade Deal
 

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